Posted
by
timothyon Thursday January 30, 2014 @12:00PM
from the all-the-way-to-the-bank dept.

Nerval's Lobster writes "Google had previously sold Motorola's Home division for $2.4 billion. Combine that with yesterday's $2.91 billion sale of Motorola's remaining assets, subtract the $12.5 billion acquisition price for the company back in 2011, and Google's little smartphone adventure cost it roughly $7.1 billion even before you start throwing in expenses related to actual production, marketing, and personnel. That's a hefty chunk of change, but some analysts think the deal was ultimately a good one because it allowed Google to pick up patents, engineering talent, and insight into the mobile-device marketplace. It's debatable, however, whether those patents ultimately helped Android in the still-raging smartphone wars, and Google was slow to promote Motorola smartphones out of fear of irritating other Android manufacturers. At least Google can console itself with the thought that so many of its other acquisitions—including YouTube and DoubleClick—resulted in massive profits; but you can't hit a home run every time you step up to bat."

You should also include the ~$1B loss that Google incurred as operating expenses while owning the company. It's still worth taking a loss on the sale in my opinion and that patents that they acquired may well be worth even more than the loss. Motorola was going to continue bleeding money and placed Google in an uncomfortable position with the other hardware manufacturers.

You should also include the ~$1B loss that Google incurred as operating expenses while owning the company. It's still worth taking a loss on the sale in my opinion and that patents that they acquired may well be worth even more than the loss. Motorola was going to continue bleeding money and placed Google in an uncomfortable position with the other hardware manufacturers.

If that's true, then it's a shrewd move by Google.

People forget that the primary goal of the Motorola acquisition was to keep very valuable patents out of the hands of patent trolls like Apple and Microsoft. So by heading off very expensive law suits, they'll stop even more significant losses.

That might be well worth it though. Take a few things into consideration here:

- Of all people, they sold it to Lenovo, who has been rather disruptive in the PC making industry; not an easy thing to do even when they first started. Remember, they took the hardware division from IBM that was doing so-so at best, crappy at worst.- Lenovo wanted to get into the mobile business before buying Moto. If I were to guess, they came to Google on this one rather than Google coming to them (there wasn't any rumors of "motorola for sale" that I recall...maybe I'm wrong here.)- Lenovo going into the mobile business with Android is a VERY GOOD THING for Google and Android in general. Think about it: The more OEM's you have pushing Android, the better, especially if they can take some of the market share away from Samsung, which I think they are probably the most well positioned OEM to do so.

Lenovo was already in the mobile business. They've been out competing Samsung at the low end of the market. What they needed was better products at the mid to high range. Motorola's newer phones looked good, but the marketing wasn't working. We'll see if Lenovo can do better.

Lenovo is making a play to keep enterprise business, and choke Dell and HP off to consumer space only. Lenovo has some incredible services that come along with a contract to buy their stuff in an enterprise. They just bought IBM's xSeries and BladeCenter business. They are in quite tight with Intel when it comes to vPro management and SmartConnect. They are now rebadging thin clients and competing VERY hard on price against both Wyse (Dell) and HP.

Motorola sells shitloads of gear to enterprise - handheld scan guns, manageable access points, ruggedized handhelds, etc. Lenovo now gets that business to leverage the rest of their sales as a "one stop shop" that no one else is set up to compete with - all they need to do is partner with a MDM provider that isn't garbage, and they'll already be better than Motorola was in 2010 when they were trying to hawk MSP to world+dog...

Motorola Solutions sells the ruggedized handhelds and two way radios Much of their product line outside of the 2 way radios came from the acquisition of Symbol Technologies somewhere in the 2006-2007 time frame.
Motorola Mobility was the cell phones, set top boxes, and all the other stuff.
Totally separate companies.

Lenovo were already in the smartphone market with several Android phones [lenovo.com]. In fact, they were the fifth largest smartphone manufacturer in the world, shipping 45.5 million smartphones in 2013. Looks like most of those were in emerging markets though, so the Motorola Mobility acquisition should give them a big step forward into the western markets.

In any case, their stated game plan with Moto wasn't to sell off the hardware handset division.

what, they didn't tell everyone up front they wanted to sell, and let the decent employees and investors leave, and let the business languish for a few years so the stop would drop to a point and they'd have to sell it for a fraction of what they paid?

of course they didn't say that, but it's obvious they didn't want motorola for the hardware business. why would they want to compete in an already saturated mobile device market with the same manufacturers that are making android dominate the world? they stood

One would be hard pressed to agree with that value given that EVERY time Google has tried to use them in court, Google lost...

It's nice to have patents for defensive purposes but it's not clear these are doing that much for them. People seem to be treating patents like piles of coal, ignoring that one persons pile of patents is quite different than another... it doesn't matter if you have 10,000 patents if your opponent has a key one you cannot work around.

If you're going to include what amounts to a $75 million footnote, you should also include the much more significant operational losses Motorola incurred during the time Google owned it which will significantly increase the cost (by most accounts, almost double your figure which, admittedly, is still about a third what the summary erroneously suggests).

We don't know how much Moto cash and how many deferred tax assets are going to Lenovo as part of the sale. When that information becomes publicly available (if it ever does) we'll have a better idea what the final price was. Even if the patents (and the advanced development lab that Google is keeping) ultimately cost them $3 or $4 billion they probably got reasonable value for money, so although the Moto buy wasn't a home run by Google it wasn't a strikeout either.

And Google could have spent far less than $1.56B to lobby for the destruction of software patents that are costing manufacturers of Android devices billions of dollars in court, settlement, and licensing fees. But Google would rather talk out of both sides of their ass and say that they oppose software patents while taking no serious actions to work toward ending them.

This was Motorola (inventor of the cellphone). Not all patents are software patents.

Yes, but Motorola's patents are on trivial things such as radio technology, modulation techniques, compression and encoding, antenna designs, digital signal processing techniques, using very little power, frequency hoping, GSM, and other things.

Those patents are insignificant next to the innovations of bouncy scrolling and pinch to zoom!

You're not wrong, but what often happens is that new patents are acquired by the company as they research their golden goose further.
The original patents may have expired, but Motorola almost certainly had a library of patents covering years of research and improvements in the field.

There are huge Corps that rely heavily on convoluted IP law to make a profit. More importantly Google would stand to profit greatly from IP laws that make sense. The problem with that is that Apple and Microsoft will pay through the nose to keep Google from getting that win. There is no amount of money Google can spend that Apple and Microsoft will not match and then some.

The people could stand up and demand the changes but it is hard to make the case to them that it effects them at all. People currently a

They could not do it without risking the ire of the Android OEMs. What would you rather have them do pull a 3fx buys STB systems move? Yeah that worked really well. Not.

They got the patents which is what they wanted. Nothing more to see here. Lenovo at least has the money to continue driving competition in the Android OEM market, not to mention the in-house production expertise since they do vertical integration. Only them and Samsung have the in-house capacity required to mass produce cheap high quality ce

I've seen pretty convincing analysis today showing that, when you take the tax benefits of the deal and Motorola's cash position into account, Google is about $1bn to the good out of the deal, and it's retaining the patents. So it has bought a loss-making company for $12bn, broken it up into bits it can sell for around $5bn, got $3bn cash out of it, and about $6bn off its tax bill over the next six years, while gaining a large and important patent portfolio. Doesn't look look like a loss to me.

The subtext, the one being ignored as people are totting up the ways Google made money on the deal, is that this is exactly the kind of behavior so often deplored when someone who isn't Google does it.

So it has bought a loss-making company for $12bn, broken it up into bits it can sell for around $5bn, got $3bn cash out of it, and about $6bn off its tax bill over the next six years, while gaining a large and important patent portfolio. Doesn't look look like a loss to me.

So when Google does it, that's just fine, but OMG $companyOrInvestorNotNamedGoogle IS A CORPORATE RAIDER BASTARD WHO TOOK ER JERBS!!! for doing the same thing.

Not surprising of course but zero mention of the employees of Motorola Mobility and Motorola Home who got whipsawed back and forth these last few years. I remember celebrating back when Google bought "us" a few years back...only to quickly see that they had zero interest in anything but the patents. So happy to have gotten out early.

Google didn't send a CEO to Moto to drive the business into the ground prior to acquisition and drive the price down. Motorola Mobility did that to themselves before Google got involved. They put the business in such a state that Google had to either buy it or let the patents for the cellular phone go to patent trolls. Those patents include codec patents important for Google's free and open codec. People seem to be forgetting that piece.

Yes, because it would've been a lot better if you'd have been left to file for bankruptcy or be taken over by an even more predatory buyer wouldn't it?

If you're working for a failing company you should be grateful that anyone fucking bought you and at least prolonged your jobs for a few more years if nothing else. It's not exactly their fault that you guys were running the company into the ground in the first place is it? The other guys at Google don't work hard to stay competitive just to subsidise your ex

Actually there's a whole bunch more accounting that was done, and you can reasonably argue that it basically cost Google about $1B to get access to the patents:

At $12.5B, Motorola is Google’s largest acquisition to date. Google paid $40/share in cash, but received ~$11 / share in cash and $8 / share in deferred taxassets. Thus the value ascribed to operations + patents was about $21 / share, or$6.3B, reflecting a multiple of ~0.5x sales and 12x EBITDA. Now adjusting thisfurther for the $2.35B total consideration Google is expected to receive for theMotorola Home business, we get a purchase price of just under $4B for Motorola'shandset business and patent portfolio (17K patents and 7.5K patent applications).

1. Patents that will later earn (or save) more money than they lost2. Talent (what do self driving cars and autonomous robots have in common: the need to communicate wirelessly)3. An indefinite multi-billion tax writeoff that ensures that Google joins GE and other large corporations that pay no taxes

Motorola Mobility consisted of:1. a handset business2. a set top box business3. a patent portfolio4. a bunch of cash5. a bunch of tax assets, which the company couldn't use because it wasn't making enough money

Google wanted the patent portfolio, so it bought the company (the price of which incorporated the cash), utilized the tax assets (which had been worthless until MM was purchased), sold the set top box business to a set top box maker (Arris), and is now selling the handset business to a company in the handset business.

This isn't "asset stripping," since the pieces are worth more, and can be more successful, as separate pieces. It's breaking up a conglomerate that didn't make sense.

I hope the SEC stops this sale to Lenovo. Already, sensitive agencies have banned Lenovo laptops... and having another core technology going to be owned by a country not friendly to the US is a bad thing.

The value of the patents is the question. The definition of Fair Market Value is the price determined between a willing buyer and a willing seller. The proposition that all Google was ever really wanted from Moto was its IP seems self evident. Google was willing to buy the Home and Phone hardware operations to get the IP. Google was under no constraint or duress. Like other major players in the phone space it had a need to own enough IP not to be a target for constant demands. The financial press sug

YouTube is expected to generate about $5.6 billion in gross advertising revenue worldwide this year, according to a report from research firm eMarketer — an estimate considerably higher than previous Wall Street forecasts.

YouTube will net $1.96 billion in ad revenue, up 66% from 2012, after paying content and ad partners, according to eMarketer. YouTube’s projected $1.1 billion in U.S. net revenue would represent 6.3% of all of Google’s net ad revenues for the year, the firm estimated.

About 79% of YouTube’s U.S. ad revenue is from video advertising, with an estimated $850 million in for the year. That would give it a 20.5% share of the overall $4.15 billion U.S. video ad market. In 2014, eMarketer estimates YouTube video-ad revenue to hit $1.22 billion taking a 21.1% share.

To analyze YouTube revenue, eMarketer said it developed forecasting models based on third-party research on its ad revenue, ad impressions, rates, usage, partner fees and other figures.

People forget Google is keeping the patents previously held by motorola in this deal. The patents would be used solely to defend against litigious trolls like Microsoft and Apple. Microsoft -- having failed deleteriously to make any headway in mobile phones -- being relegated to siphoning off revenue from Google, and Apple having run out of gas to keep innovating after blowing their wad on iDevices in the Jobs era. Without a strong patent portfolio Google would expect to find itself bled quarterly in tan

Here we go again...Everything MS and Apple does is evil and they can't survive without leeching off of Google. Google is good and will lead us to the promise land where there will be milk and honey and Google will keep us safe from the bad MS and Apple.

Give it a frigging rest. We've seen time and time again that Google plays there games too. If it wasn't for you Fandroids they'd be on the heap of crap companies just like the rest.

The best analysis of this seems to be ArsTechnica [arstechnica.com], which looks into the conflict with Samsung. Even in the beginning of the deal, people were furrowing brows on how Google can be competing on hardware with the rest of Android.

I live in Chicago. I have a relative in Motorola. Google spent a lot of cash to get people to move to the Merchandise Mart downtown, spending a huge wad of cash to lease out an entire floor of the Mart. This was very disruptive for the teams, and only would pay longer term benefits. T

I think they got rid of the handset division as fast as the tax law would allow. Take a look at this way.

Motorola (M) could get a higher price is they sold their business as a packaged deal, Motorola Mobility (MM). They got more bidders that way. (It’s not exactly what they did, but it was effectively what they did when they spun off that division.)

Google wanted the patents but not the hardware division for the reason you mentioned but they had to buy both. They wanted to get rid of it as fast as possible.

Assuming MM was spun off from M in a tax free spin off, one normally has to wait about 2 years before one can sell off a division. If it was sold off before then it would trigger a big tax bill for MM. Most spin off require the spun off division to pay their parent’s tax bill if they are bought out.

So we wait 2 years and 6 months and guess what happens – Google sells off the handset division.

The best analysis of this seems to be ArsTechnica [arstechnica.com], which looks into the conflict with Samsung. Even in the beginning of the deal, people were furrowing brows on how Google can be competing on hardware with the rest of Android.

I live in Chicago. I have a relative in Motorola. Google spent a lot of cash to get people to move to the Merchandise Mart downtown, spending a huge wad of cash to lease out an entire floor of the Mart. This was very disruptive for the teams, and only would pay longer term benefits. This doesn't seem to me to be a strip-and-dump purchase by Google, but the Samsung-Tizen thing kind of forced their hand. People were worrying about Android fragmentation, and the sale of Motorola was the pound of flesh that Google needed to give up to stop a huge split with Samsung.

That's not correct. Tizen is not an Android fork (it's actually a Linux fork) so it will not fragment Android. The sale of Motorola Mobile will not affect Samsung plans for lunching Tizen powered phones. In the two years that Google owned Motorola Mobile they didn't show any interest in running the company. The fact that Motorola Mobile waited almost two years to release new Android phones shows a lack of interest from Google. At the time that Google bought Motorola Mobile many of the posters on/. predict

The summary tries to paint the picture that Google's acquisition and sale of Motorola was somehow not quite what Google had hoped for. When Google announced that they would buy Motorola Mobility on Aug 15 2011 Google closed at: $557.23. Today Google is at $1140. Between yesterday and today Google jumped > 3%. Obviously Google's stock price is influenced by many factors but the acquisition of Motorola has not seemed to deter the massive gains Google has experienced over the past 2 or 3 years.

$12 Billion sitting in a bank account really doesn't do anything for Google, and it makes investors upset. So they bought talent and patents, took what they wanted from Motorola and are now selling the left over parts. They are not taking a loss. This isn't MySpace being bought for $500 million and being sold for $35 million, it is idiotic to suggest this was a stinging defeat. It was a shrewd business decision.

Remove the word "business" from you post and rethink. I am pretty sure there's some people here that are comfortable talking billions and business. However, I was Motorola's _customer_. I bought Moto X because it was from Motorola - Google company.Google engineering influence was obvious in this product. I expected more to come in the future which most likely won't happen.

Think about Google and Motorola engineers. They worked in a company with a lot of opportunities to innovate, learn and grow. Now things l

I got up early for Motorola's Black Friday sale to get a developer's edition Moto X. They launched three hours after their advertised start time. Once their systems came online, I got an order in in less than three minutes. I got an order confirmation and hours later Motorola staff was posting on social media, urging people to buy the model I got. The next day, they send me a cancellation notice saying they have no stock and they're not going to honor my order, despite offer and acceptance.

B&N did the same to me a couple years ago with the touchpad fire sale. They even took my money and had to refund it a month later when they discovered they sold a million of the things but only had 5 in stock.

I got up early for Motorola's Black Friday sale to get a developer's edition Moto X. They launched three hours after their advertised start time. Once their systems came online, I got an order in in less than three minutes. I got an order confirmation and hours later Motorola staff was posting on social media, urging people to buy the model I got. The next day, they send me a cancellation notice saying they have no stock and they're not going to honor my order, despite offer and acceptance.

The Moto X was actually an outstanding phone. I dumped my gs3 for one. I think the real end-game here was getting Samsung back in line. Motorola phones were selling enough units to raise alarms at Samsung. It's not like Samsung was in any danger of losing their stranglehold on android phone sales in the short term, but long-term with Google's backing it was only a matter of time until Motorola started taking significant chunks. End result: Samsung has supposedly agreed to dump it's custom UIs and custom applications and fully embrace the Play store and the Google ecosystem. It seems unlikely the timing is just a coincidence.

There are reports that Samsung threatened to fork Android. With the new UI they showed at CES, it sort of drove the message home with Google and apparently that prompted meetings that led to where we are now...

Ya, you have your history of events backwards. Samsung created Bada in 2010 not too long after Google started going after third parties who were including their apps without approval (read cyanognmod). Google acquired Motorola in 2011 AFTER Samsung started creating their own OS and their own ecosystem to compete directly with Google. Samsung continued down that path until this year, interestingly enough, just after the holiday season in which the Moto X started picking up steam. I'm guessing when Samsung saw VZW approve kitkat for the Moto X almost immediately after release, they saw how screwed they were going to be going forward. As a consumer, when your choice is Motorola with updates immediately after release and minimal bloatware, or Samsung who can be upwards of a YEAR later on VZW and an interface that you either love or hate, the choice is pretty easy. I can tell you I've personally steered at least 10 people away from Samsung and onto a Moto X after letting them play with my phone for 5 minutes and showing them that the spec sheet doesn't always tell the full story.

The Moto X was actually an outstanding phone. I dumped my gs3 for one. I think the real end-game here was getting Samsung back in line.

So was a primary reason to prevent the Samsung android singularity?

I think Google and Samsung are going to have clashes again in the future. Google has created a monster in South Korea, and this recent patent "harmonization" isn't going to prevent other "growing pains" as Samsung continues to eclipse any and all Android vendors (and continue to put pressure on Apple).

I was hoping that HTC would regain some territory with the HTC One, it looked like a great phone - iPhone quality build+display, but Android

While the agreement details are still secret, the rumor is that part of the 10-year licensing agreement between Google and Samsung included Samsung agreeing to cease developing it's own app store, UI overlay (touchwiz), and OS (tizen). They may have it out again in the future, but I doubt Google really cares if Samsung tries to go a different direction in 10 years. Android will be so entrenched they won't make any headway by then. And to be quite honest, I think Google WANTS Samsung to kill off everyone

It's called The Economy, where many more numbers than profit and loss factors into stock price, see. And why depressions happen: People think they can outguess people with decades of experience and do better as Mom & Pop... happens enough, a lot of people lose their shirts when control is reasserted.
That said, I will miss the old Motorola. But that's the 21st Century Economy: Profit, profit, PROFIT! or die.

How is it that Google posts a $7Billion+ loss and the stock rises $30+ and Apple posts record profit yet the stock drops $50? That is just absurd!!

bought Motorola for anything other than the patents, you're just fooling yourself. Having Motorola Mobility come with them was just the secret decoder ring in the cereal box. MM is not really as fun as it seemed at first, so time to put the toys away.

Exactly. Moto didn't lock bootloaders because they were forced to by evil carriers like Verizon... they did it out of religious zeal, and a belief that it was a moral imperative.

To remake Motorola in Google's image, they would have had to literally fire most of Motorola's managers, and would have probably had to fire at least 10-30% of their engineering staff as well. They were able to do enough housecleaning to make the Moto-X and Moto-G happen, but Google knew that the rest of the company was too toxic to

All GOOG stock holders have voting rights, it just doesn't do any good because Larry and Sergey have majority control so nobody else's vote matters. But they do have the right to cast a meaningless vote.

(Nobody bought GOOG stock with the expectation that they'd have an influence of the company - the IPO letter and successive founders' letters have said so repeatedly)

You act as if they were not going to be losing their jobs regardless. Sadly moto was a faling company. Once loved by many, everyone I know was hoping for a comeback but they fell behind the times along with RIM.

The company was going to go out and everyone was going to lose their jobs anyway, google did some damage control, and gave people a lifeline. From people I know who were working there at the time, they were happy as they had more time to find new work then they believed they would have without bei

It isn't. You seem to think market cap has any resemblance with real value. It doesn't. Take Apple. No hard assets except for a building with some R&D people. If it goes belly up from a bad product launch all their profits essentially become zero and their useable assets at most will consist of cash and investments into things which are not related to the business they supposedly are in.

People seem to think that whatever money Apple has it is enough to compete into the future. I have the following to sa